In a Nutshell
- No monthly repayments
- No upfront or out of pocket fees
- Quick online application
- Sharing a cut of your home’s appreciation
- Appraiser and escrow fees
- Processing fees
Point at a Glance
|Product Types||Home equity investment|
|Featured Loans||“Point” Home equity investment|
|Repayment Terms||1-10 years|
|Maximum Borrowing Amount||$250,000|
|Minimum Credit Score||500|
|Best For||Homeowners who value no monthly payments.|
Based in Silicon Valley, Point is disrupting the traditional home equity loans market with a new way of helping homeowners cash in on your home’s value. It doesn’t offer home equity loans (HELs) or home equity lines of credit (HELOCs). Instead, it pays the homeowner for a portion of your equity and shares in the home’s appreciation (or depreciation) when the you sells your home or decides to buy back Point’s portion of the equity.
Home equity investments cater to:
- Homeowners who are optimizing for cashflow
- Homeowners with want to pay off substantial debts
- Homeowners who believe their home price is going to stop appreciating (or may even start depreciating)
Unlike traditional HELs and HELOCs where the borrower has a monthly payment on a fixed term, home equity investments have no monthly payments. This makes the Point home equity investment ideal for homeowners looking to get a large lump sum WITHOUT the monthly payments.
If you think the property market is going to cool down and rates of appreciation will slow (or your home may start depreciating in value) then home equity investments might be ideal for you. Since the cost is tied to your home’s appreciation or depreciation, a home equity investment can be much cheaper than a loan if your home price is stagnant or going down. If home price appreciation picks up again, you could replace your home equity investment from Point with a more traditional loan product.
Types of Loans/Products
Point offers only one product, which is called a home equity investment. With home equity investments, you receive a lump sum today in exchange for sharing in your home’s appreciation. There are no monthly repayments, and Point keeps its share of the equity until the homeowner sells the property or buys out Point.
Here are some of Point’s notable features:
- No monthly payments and no interest rates
- Processing fee of 3-5%
- To qualify, homeowners must meet certain conditions including debt-to-income ratio, credit score, and homeowner equity in their house
- The total cost depends on how much your home’s value changes. When your home appreciates, Point makes money – but only up to a certain limit. If the home depreciates, you may be paying Point back less than you received.
The Application Process
1) Check if you qualify online
Provide basic details about home and household finances, and show proof that you’ll retain at least 20% of the equity in your home after Point’s investment. Point’s automated system will instantly pre-approve or reject you based on the details you provide. This takes only 2 minutes.
2) If pre-approved, Point will make a provisional offer
The offer is typically in the range of 5-20% of your home’s current value. You’ll be asked to complete a full application. The underwriting team usually reviews applications in 1-3 days and issues an updated offer (pending appraisal).
3) Get an appraisal
If you accept the offer from Point, a licensed appraiser will visit your home and give it a valuation. Point will share the appraiser’s report with you once it’s complete, which usually takes 5-8 days.
4) Get your final offer
Point will send you a final offer once the appraisal has been completed and it has received all your documents. The last pieces of business are for you to sign the Point Homeowner Agreement and for Point to file a Deed of Trust and Memorandum of Option on your property. This all takes about 3-7 days.
5) Get your funds
Point sends you the funds within 4 days of closing.
Pros and Cons
The main advantage to using Point is that it strips out all the downsides of a traditional loan. There are no monthly repayments and no interest, meaning you don’t have to stress about falling behind on your payments. There are no upfront costs, and no out of pocket expenses unless you get funded.
Having said that, there are some fees to pay from your funding amount, namely processing fees and the costs of escrow and independent appraisal. In most cases, the biggest cost is the cut you give to Point when your share appreciates, instead of you pocketing the increased value of that home equity.
Rates and Fees– The Bare Basics
Point charges a processing fee of 3-5% of the value of the amount it invests in your property, plus escrow and appraisal fees. For example, if it invests $100,000 in your property and charges the minimum 3% processing fee plus around $600 for appraisal and $500 for escrow, you’d deduct $4,100 from the funds you receive from Point. Aside from that, the only cost is the cost of paying Point its portion when you sell your home or buy out Point’s share in your property.
Point offers a useful calculator help you calculate these costs. The following table gives a few examples. It assumes a term of 5 years, home value of $400,000, a Point investment of $40,000 (10%), a risk-adjusted home value of $340,000 (or risk adjustment of 15%, although Point can apply an adjustment of up to 20% to protect its investment).
|Future home values||$535,300||$300,000|
Terms are for 1 to 10 years. You can repay Point the original investment amount and a share of the home’s appreciation when the home is sold, refinanced, or when the term limit is reached – whichever comes first.
Help & Support
Point offers customer service via phone, email and via live chat during regular U.S. business hours. The entire application process is online which makes the process painless and quicker. If you get pre-approved, a dedicated Point representative will contact you to go through the rest of the application process.
Point represents the first major disruption to the second mortgage market in more than 30 years. Then, the Tax Reform Act 1986 left a loophole whereby homeowners could deduct all interest from home equity loans from their taxes.
Today, Point has created a unique and innovative product whereby homeowners need not pay any interest whatsoever to borrow against their home. In fact, Point doesn’t require homeowners to “borrow” at all. Homeowners simply agree to have Point invest in their home, then pay Point a cut of their home’s appreciation in value when they sell, refinance, or reach the end of their term.
Is Point added to the title of the property?
- No. Point files a Deed of Trust and Memorandum of Option on your property with your county recorder. In the event you default on your property, Point can exercise the option and initiate a sale.
Does the homeowner have to live in the property?
- No. But a penalty fee will be charged at the end of the term if you live in your property upon closing with Point and then turn it into a rental during the term.
How much does the homeowner owe Point if they choose to repay before the end of the term?
- The amount is calculated using the property’s value at the time, as determined by an appraisal, automated valuation model (AVM), or a broker price opinion (BPO). If you’re refinancing, Point can also use your lender’s appraisal.
What happens if the home depreciates?
- Point shares in the downside below a threshold value which means you may pay Point back less than you received from them..
Who is behind Point?
- Point’s investors include big names in venture capital and seed funding: Andreessen Horowitz, Bloomberg BETA, Greylock Partners, SV Angel, Ribbit Capital, and JPMorgan Chase’s Center for Financial Services Innovation.
Point Digital Finance, Inc.
PO Box 192
Palo Alto, CA 94302